Financial Management

Chapter 4 Financial Planning and Forecasting Financial Statements
ANSWERS TO SELECTED END-OF-CHAPTER QUESTIONS

4-1

a. The operate plan provides detailed implementation guidance designed to light upon corporate objectives. It details who is responsible for what particular function, and when specific tasks atomic number 18 to be accomplished. Many companies use an operating plan which spans a 5-year period, and hence is called the five-year plan. b. The fiscal plan details the financial aspects of the confederacys operating plan. In addition to an analysis of the households current financial condition, the financial plan commonly includes a gross revenue forecast, the capital budget, the cash budget, pro forma financial dictations, and the external financing plan. c. A sales forecast is still the forecast of unit and dollar sales for some afterlife period. Of course, a lot of work is required to produce a good sales forecast. Generally, sales forecasts are based on the recent trend in sales plus forecasts of the economical prospects for the nation, industry, region, and so forth. The sales forecast is critical to good financial planning. d. With the percent of sales forecasting method, many items on the income statement and balance sheets are assumed to increase proportionally with sales.



As sales increase, these items that are tied to sales also increase, and the set of these items for a particular year are estimated as percentages of the forecasted sales for that year. e. Funds are spontaneously generated if a liability a ccount increases spontaneously (automatically) as sales increase. An increase in a liability account is a source of bills, thus funds have been generated. Two examples of spontaneous liability accounts are accounts collectible and accrued wages. Note that notes payable, although a current liability account, is not a spontaneous source of funds since an increase in notes payable requires a specific action between the smashed and a creditor. f. The percentage of...If you want to get a amply essay, order it on our website: Orderessay



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